DVN - Embedded Expectations Analysis - 2020 06 26
Devon Energy Corporation (DVN:USA) currently trades near historical lows relative to UAFRS-based (Uniform) assets, with a 0.4x Uniform P/B. At these levels, the market has expectations for profitability to remain muted, but management is confident about their oil price hedging, high asset quality, and well completion paceSpecifically, management is confident they protected about half of their expected oil volumes for H1 2021 at nearly $40 per barrel, that they utilized swaps to lock in pricing for their Eagle Ford and Delaware Basin production, and that they plan to maintain a steady well completion pace in 2021. In addition, they are confident their industry needs to focus more on higher free cash flow yield and consistent cash returns to shareholders, that high quality assets underpin their future success, and that they could accelerate their maintenance activities regardless of their financial leverage. Furthermore, management is confident the redevelopment and infill in Eagle Ford will extend the life of the competitive economic work there
Devon Energy is an independent energy company engaged primarily in the exploration, development and production of oil, natural gas and natural gas liquids. The company's operations are concentrated in various onshore areas in United States. The company's areas of operation include Delaware Basin, Eagle Ford, Powder River Basin and the STACK development, located primarily in Oklahoma's Canadian, Kingfisher and Blaine counties.
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